When you are applying for a little business loan perhaps you have often wondered what Bank Managers look for when deciding whether to aid your request or not?
One of the key aspects is you. If you’re running a small business then probably the business is very just you and probably not many other people. You may operate under an impressive name or from glitzy offices but whether it’s all down to you then from the bank’s perspective ‘you’ will be the key to a safe lending.
Here are simply a few aspects of a person’s character which banks consider important.
What Is Your Age?
Like it or not, age must be a factor in the credit assessment. If a businessman, particularly a one-man band operation, asks for a loan repayable over 25 years and he’s already 70, the chances of him being around to see repayment are pretty slim! If he’s also the true secret person within the business who makes it all tick, then his loss may have an effect on business performance.
On the other hand, a spotty-faced 18 year old just out of school requesting $100,000 may not often be a strength either! Age is not a major problem but it is something taken into consideration.
What Is Your Degree of Commitment?
A Manager can usually get a feel for a person’s commitment to the project or business in a variety of ways. Such as, it can come across in their language and the passion with which they talk about the business. YOUR BANK wants to see someone who is both loveate and enthusiastic about the job, so you can see now why it’s important to look and sound confident.
A business owner’s commitment may also be measured in more tangible conditions such as how a lot of their money they are putting into the venture or alternatively how much they may have withdrawn from the business enterprise over the years. If the owner has regularly injected cash in the business loan to help with working capital or to buy new machinery, then this is an encouraging sign. However, if cash has been withdrawn on a regular basis for no apparent reason, then the Manager will need to ask why, as it might not exactly demonstrate full determination to the business enterprise.
But what if only a tiny amount of cash or no cash at all is being placed into a fresh project? Well, if you haven’t got it, then you haven’t first got it! However, commitment can be evidenced by the actual fact you are going to pledge your home as security.
In the meantime, a question to ask yourself is how exactly does your commitment to the business enterprise look to an outsider?
Seeing what the business owner has put in, and what he’s ready to lose, can help the Manager come up with a fair assessment of the person’s commitment. Hopefully it’s going to be assessed more as a strength when compared to a weakness!
Can You Be Considered a Person of Integrity and Honesty?
This is a difficult one to assess but we all pick up vibes about individuals within a few minutes of meeting them. Things either ring true along or they don’t.
To back up his intuition the Manager can often get information about someone from other people. Staff within the lender are sometimes a good source of information for Managers. Every office has someone who generally seems to know everything about people in the locality! These folks are a fountain of knowledge!
If you have skeletons in the cupboard, don’t assume they won’t turn out! If they’re bad enough they are bound to surface and it can impact upon your chances of success.
What Was The Source of Introduction?
In preparing your Business Plan, or building your new business, you might decide you don’t want to present it to your own Bank for a variety of reasons
Having made the decision to refer your Plan elsewhere, you have 2 options: you can either arrive cold at the Bank of your choice, or you could ask a business colleague to introduce you with their Bank (assuming they are simply simply pleased with the service they are getting).
If he knows you and the abilities you possess, he may be prepared to do more than point you in the right direction; he may be happy to “vouch” for you. By doing this, he’s telling his Manager that, in his opinion, you have a good chance of success and that you will be worth support.
If your introducer is a respected businessman and operates a good account at the lender, then this sort of introduction could be considered as a strength, a positive point in your favour.
You can see that in operating a small business you are a very important asset where the Bank can be involved. Be sure to capitalize on that when approaching the Bank for financing.